Enhance in reference to the nature of the activities

The financial crisis has highlighted the limits of accounting standards IFRS, even though they are a positive step forward. Seek to suspend was not news. However their imperfections are beginning to be recognized and the need to improve as quickly as possible, in particular to apply the principle of the "mark to market" when it is economically relevant.

The crisis was not triggered by accounting standards, but it confirmed certain weaknesses:

When the "fair value" of assets is to give them their market value, volatility in the markets is imported in the accounts of the companies. However, for most companies, including those of the financial sector, the economic model is unfounded on short-term considerations but on the basis of projections of activities in the medium or long term. The market value may then create a bias pointed out by Jacques de Larosière in his recent report to the European Commission: "long term economic values should be the central reference for defining the methods of evaluation."

Instant market values becoming a determining element of the constitution of the results, they can lead the management or other stakeholders to make critical decisions regarding bonus, dividends, investments and so to "mislead investors and distort the policies of the companies", that in addition to the market and the economy-wide pro-cyclique effect.

The "mark to market" accounting is also misleading, in constitution of bubble period, players seeing all at the same time their situation evolve through the same deforming lenses.

Finally, the worst came in extreme situations, when markets work more (liquidity) and no price can be formed.

Total current accounting standards tend to give priority in the short term, which is an undue bias.

The solutions we propose are the following:

Principle of precaution, first. No extension of the application of the principle of the "mark to market" without a detailed analysis of the consequences.

With regard to the financial instruments in illiquid markets, the report of the Group of thirty indicates that "..."fair value"accounting principles should be reassessed to propose more realistic methods to evaluate less liquid financial instruments ...". Thus, for this category of assets, another accounting approach should be sought, based on the one hand on the risk-taking discounted expected and on the other hand, in terms of balance sheet, on the cost of the asset after provisioning or depreciation resulting from the evolution of the fundamental.

Enhance in reference to the nature of the activities. There is nothing to add to this another comment by the Group of thirty, presented by Paul Volcker: "the tension between the objective of financial institutions regulated that intermédient credit and liquidity risk, on the one hand, and, on the other hand, the interests of investors and creditors, should be resolved by the implementation of standards, based on the principles, which would take better into account their economic model and the underlying intention and to improve the conditions of transparency and communication.".

Address the issue of the pro-cyclical nature so that companies, particularly banks, could constitute reservations in boom times for use in reversal of the cycle. This is what indicates Ben Bernanke, Federal Reserve Chairman: "It would be useful to reconsider accounting standards relating to assessments of assets and loss provisioning, which could lead to the amendment of the rules in such a way to reduce their pro-cyclical nature ...."

Take account, in respect to financial institutions, greater consistency between the accounting and prudential, rules at least to reduce the risk of regulatory arbitration.

These issues were treated largely with the G20, which "appealed to standardisers accountants to work quickly with financial regulators and supervisors and improve standards of valuation and provisioning. Immediately after, the American FASB (Financial Accounting Standards Board) has evolved significantly on two important topics: assessment of illiquid assets and provisioning procedures. It is essential that the IASB (International Accounting Standards Board) to do the same, as soon as possible, including to maintain a "level playing field" between Europe and the United States.

Improving the standardisation process is an operational priority. It is to develop the tests of impact, to better explain the relationship between decisions on standards and consultation of users and preparers of accounts, specify the compositions of the expert advisory committees and missions...

Second, the directors of the IASB should come from backgrounds different (accountants, business executives, public authorities...) and represent all of the stakeholders.

Third, the accounting standards as a common good, the standard-setters should be independent but at the same time responsible with authorities in charge of the common interest and the final risk. The current project of the Monitoring Board does not give the authorities a sufficient role. In addition, the position of the IASB has not evolved significantly in any of the topics (appointment of trustees; responses to the questions of general interest by regulators and policy issues). That is why, as proposed by the g-20, representatives of central banks, regulators and prudential supervisors and the various authorities concerned should form part of the work of the IASB. This is the case in all jurisdictions.

Finally, the mandate of the IASB should be supplemented to include the principles of prudence and stability.

These recommendations are intended to strengthen the legitimacy of the IASB. The IASB, contributing to the convergence of accounting standards from 100 countries, is a success. The institution must now take a new step, taking lessons from the crisis, and to cope with new responsibilities.

In addressing the accounting standards, the G20 has taken an essential confidence-building initiative. Must be that these guidelines are effectively implemented and we want, in the interest of the real economy, that the IASB is now ready to act in this direction.